Fitch Affirms The South African Bank of Athens at 'AA-(zaf)'
Fitch Ratings-London/Johannesburg-27 August 2009: Fitch Ratings has today affirmed The South African Bank of Athens Limited's (SABA) National Long-term rating at 'AA-(zaf)' with a Negative Outlook, its National Short-term rating at 'F1+(zaf)', and Support Rating at '2'.
The affirmation of the National ratings reflects the high level of support SABA could expect to receive from its majority shareholder, National Bank of Greece S.A. (NBG; rated 'A-'/Outlook Negative) if required. This support can be inferred from NBG's 99.7% ownership of SABA, NBG's management representation on SABA's board, SABA's committed liquidity facilities and previous capital injections, notably during FY08. Any change of SABA's National ratings would be directly linked to changes of NBG's ratings. Negative pressure on SABA's National and Support ratings could occur if NBG reduces its shareholding in SABA and/or if there is a change in its level of support.
SABA's net earnings improved by 44.2% to ZAR24.2m during FY08 on the back of higher net interest and non-interest income, combined with an improved efficiency ratio. SABA's asset quality indicators weakened during FY08 and deteriorated further in H109. Fitch considers that the sharp increase in non-performing loans and watch list credits to H109 could result in the need for higher impairment charges which could materially affect SABA's FY09 financial performance.
SABA's credit growth moderated during FY08, with loans increasing by 6.4% to ZAR1,023.4m at FYE08. Credit risk is concentrated, with the 20-largest loans accounting for 55.7% of gross loans and representing 308% of capital at FYE08.
SABA's funding derives from deposits from its core base of retail and SME clients, as well as inter-group borrowing. Despite a fresh capital injection of ZAR75m during June 2008 from NBG, Fitch considers SABA's Tier 1 capital adequacy ratio of 14.0% at FYE08 (FYE07: 8.6%) to be low in light of its concentrated credit risk and deteriorating asset quality.
SABA is a small, niche commercial bank which services the financial needs, and supports the commercial activities, of the Hellenic community of South Africa. The bank has expanded its banking activities to increase market share in the local SME market and provide private banking services to the owners and employees of its SME client base.
Contacts: Denzil de Bie, Anthony Walker, Johannesburg, Tel: +27 11 380 0900.
Media Relations: Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(zaf)' for National ratings in South Africa. Specific letter grades are not therefore internationally comparable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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